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Illinois: Higher Default Risk than Iceland
By Dian L. Chu, Economic Forecasts & Opinions
Illinois made headlines a few weeks ago when it overtook California as the worst credit risk among American states. Now, the fifth most populous state in the U.S. has officially overtaken Iceland in the default risk category as well. (See screenshot below from CMA site today)
Iceland, as we know, suffered from one of the largest banking collapse in 2008, essentially went bankrupt, and has been stuck in the "2008–2010 Icelandic financial crisis” ever since. (see CDS chart from CMA)
So, for Illinois to jump ahead of the Arctic country, in terms of default risk, is no small feat, to say the least.
Just how much trouble is Illinois in? The State is looking at a two-year budget deficit going into FY2011 of at least $12.8 billion, according to a report issued by the Civic Federation's Institute for Illinois Fiscal Sustainability in January of this year,
Its poor financial discipline and the lack of will to deal with budget issues prompted both Fitch and Moody's to downgrade the State's debt rating by one notch sending its credit default swap (CDS) to a record high.
After selling another $900 million in taxable Build America Bonds this week, Chicago Tribune estimated Illinois could incur extra interest costs of about $9 million a year--$225 million over the life of the bonds--due to the wide credit spread. The State has already issued about $7.8 billion in debt in 2010, and got $4.7 billion in unpaid bills in the fiscal year ended June 30.
And this is just the tip of the iceberg as the cash-strapped State said it would issue yet more debt. Even more alarming is that Illinois is not along, quite a few states like California, New Jersey, and New York, just to name a few, are also among the deeply indebted, and high credit risk in the U.S.
For 2009 to 2012, U.S. states would have nearly $300bn in budget deficits, according to figures from the National Association of State Budget Officers (Nasbo). Meanwhile, the Center on Budget and Policy Priorities projected that states’ cumulative budget shortfall will probably reach $140bn in the coming year, the biggest yet.
So, when the urgency of European debt crisis subsides, and the bond market shifts its focus away from Europe and onto the United States, America could have its own--Greece, or even PIIGS--of some sort, as early as next year.
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Is FED buying IL Bonds too?
Wealthy suburban towns surrounding Chicago are talking up seccesion from Cook County and forming another county, stripping feedstocks for graft and payola from the Rahm, David, Barrack & MareDaley machine.
In Barbara's Relic We Trust.
Proof that the Acorn doesn't fall FAR from the tree.............
ACORN is dead and buried. It was nothing but a diversion anyhow. (And don't post any Fox News links to the contrary.) I know because I followed it from its inception in Arkansas. Dealt with them while in the property management business. They always were incapable of doing any damage above skimming a little money off the tops of the grants to fuel a few mediocre life styles. Don't believe all you read -- including this.
Does an organization of this size sound like it could be influential?
http://en.wikipedia.org/wiki/Association_of_Community_Organizations_for_...
Crushing muni debt is the Trojan Horse. Inside is the QE 2.0 backstop.
I grew up in a small railroad/farming town in Central Illinois. None of this is surprising.
Illinois is in constant political gridlock because Chicago is corrupt, parasitic, and lefty. The rest of the state is essentially like Indiana or Iowa. For years downstate drivers paid a personal property tax on vehicles that Cook County refused to enforce. Things have only gone downhill from there.
Many municipalities are in the same shape: declining populations, crushing pensions, no job growth. The answer is bankruptcy. The sooner the better, and yes this could easily be the trigger to break the global ponzi daisy chain.
I really do wonder what the exit plan to their problems are. And just no one seems to care.
IMHO, a large muni default will likely be the catalyst for the next financial crisis, unless Europe does it first.
Governor Quinn's solution? Raise taxes of course. Did you really have to ask?
The short term plan: do nothing until after the election this fall, then jack the state income tax from 3% to 5% sometime in January. Of course all along the way, they will continue to make political threats of firing teachers and police officers with one hand, while the other hand reaches deeper into the cookie jar...
http://www.chicagotribune.com/news/opinion/editorials/ct-edit-quinn-20100707,0,2074272.story
The long-term plan: starts with Bill Brady.
Trust me, a lot of us here care a great deal about the shit storm our state is in, and it seems like that care is starting to spread.
Is there a active vulcano in Illinois? Because active vulcano's are great problem solvers for countries on the verge of defaulting.
Look to Greece, that doesn't have a active vulcano!
Coincidence? I THINK NOT MY FRIENDS!
" Iceland, as we know, suffered from one of the largest baking collapse in 2008."
Not enough Yeast ?
typo, my bad, corrected. thanks.
Consider it a form of creative writing as longtime journalists get bored. Been there, done the myself. What he may mean is that the banking industry is suffering akin to that of a human being with a bad case of genital infection.
As warned about for some time, EURUSD daily chart is bullish . . .
http://stockmarket618.wordpress.com/about
C.I.N.N.
LOL
C I N N ???
California
Illinois
New Jersey
New York
Unfortunately, I think we're going to need a longer acronym.
CA Dems still are treating the state budget like (as the Irish would say) a "fooken game".
Instead of CINN, how about NINC? Maybe with a few more states we can get to NINCOMPOOP.
Yup, a corrupt state run by liberal Democrats over the past decade. And somehow people thought that electing a douchebag from this state to run the entire fucking country was a good idea???
Exactly...and his senate was going for $5m, I wonder what the EBITDA on that investment?